This is not a bug, it's a feature.
Dig/host/nslookup utilities are designed to obtain names from name servers only. They ignore /etc/hosts (and /etc/nsswitch.conf) configuration files. This issue was discussed many times on various mailing lists. Upstream status is not to add an ability to use /etc/hosts file during the name resolution process. You have to use, for example, the ping (and/or ping6) utility.

If the decision has been made then there's no point in me objecting.
I've got numerous scripts that relied on host doing resolution regardless of the source of the data. Those scripts are now broken by deliberate action.
To the decision makers I can only say - It's not a good idea to renege on a promise made earlier.